Bubble watch
“The cautionary signs today include these: the optimism that has prevailed in the markets since late 2022; the above average valuation on the S&P 500, and the fact that its stocks in most industrial groups sell at higher multiples than stocks in those industries in the rest of the world; the enthusiasm that is being applied to the new thing of AI, and perhaps the extension of that positive psychology to other high-tech areas; the implicit presumption that the top seven companies will continue to be successful; and the possibility that some of the appreciation of the S&P has stemmed from automated buying of these stocks by index investors, without regard for their intrinsic value.”
– Oaktree Capital Management co-chairman Howard Marks, in a market memo published on 1/7/25, just weeks before the DeepSeek-fueled disruption of the AI space. Read more at bit.ly/4h7AlRh.
Gold may continue to shine
“Many investors will call for caution pointing to gold prices reaching highs just like many stock market prices. But the exposure to the assets are very different. Global allocations to equities are at secular highs while gold is vastly under-owned (even by central banks!). The combination of continued geostrategic demand, strong global price momentum and central bank cuts ahead are shaping up to continue strong gold demand for ’25.”
– Bob Elliott, CEO and CIO of Unlimited Funds, in a 1/21/25 thread on X. Read more at bit.ly/4joYGDM.
More than money
“[T]he more I’ve learned about retirement planning, the more I’ve come to understand that whether, when, and how to retire is less than 50% related to money. Yes, you need to have funds. But more important, you need a network of people who care about you. You need to practice healthy habits and take care of your body. You need a plan for your days. You need activities that bring you joy. Those things are more important to a happy and satisfying retirement than a well-designed portfolio and a carefully calibrated spending rate.”
– Christine Benz, director of personal finance and retirement planning for Morningstar, from her book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement.
A humbling pursuit
“Sensible decisions will frequently make us look stupid. It is not just that virtually all good long-term decisions will go through difficult spells; it is that seemingly prudent choices will often have negative outcomes and make us appear foolish.”
– British investment analyst Joe Wiggins, in a 1/22/25 post on his Behavioral Investment blog. He noted that “investing is hard,” “humility is the critical trait for all investors,” and the humble investor will practice “sensible diversification.” Read more at bit.ly/3Ws4TEX.
